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Heterogeneous quantal response equilibrium and cognitive hierarchies

Rogers, Brian W. and Palfrey, Thomas R. and Camerer, Colin F. (2009) Heterogeneous quantal response equilibrium and cognitive hierarchies. Journal of Economic Theory, 144 (4). pp. 1440-1467. ISSN 0022-0531. doi:10.1016/j.jet.2008.11.010. https://resolver.caltech.edu/CaltechAUTHORS:20090808-142501869

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Abstract

We explore an equilibrium model of games where behavior is given by logit response functions, but payoff responsiveness and beliefs about others' responsiveness are heterogeneous. We study two substantively different ways of extending quantal response equilibrium (QRE) to this setting: (1) Heterogeneus QRE, where players share identical correct beliefs about the distribution of payoff responsiveness; and (2) Truncated QRE, where players have downward looking beliefs, systematically underestimating others' responsiveness. We show that the cognitive hierarchy model is a special case of Truncated QRE. We conduct experiments designed to differentiate these approaches. We find significant evidence of payoff responsive stochastic choice, and of heterogeneity and downward looking beliefs in some games.


Item Type:Article
Related URLs:
URLURL TypeDescription
http://dx.doi.org/10.1016/j.jet.2008.11.010DOIUNSPECIFIED
ORCID:
AuthorORCID
Palfrey, Thomas R.0000-0003-0769-8109
Camerer, Colin F.0000-0003-4049-1871
Additional Information:Copyright © 2009 Elsevier. Received 16 March 2007; revised 2 July 2008; accepted 5 November 2008. Available online 25 December 2008. We are grateful to the National Science Foundation (SES-0450712 and SES-0617820) for supporting this research. We thank audiences at Collège de France, New York University, The Ohio State University, Universitat Autonoma de Barcelona, University of Pennsylvania, University of Southern California, the 2006 ESA North American Meeting, and the 2007 AEA Annual Meeting and two referees for helpful comments.
Funders:
Funding AgencyGrant Number
NSFSES-0450712
NSFSES-0617820
Subject Keywords:Experimental economics; Game theory; Cognitive hierarchy; Quantal response equilibrium; Bounded rationality; JEL classification codes: C70; C91
Issue or Number:4
DOI:10.1016/j.jet.2008.11.010
Record Number:CaltechAUTHORS:20090808-142501869
Persistent URL:https://resolver.caltech.edu/CaltechAUTHORS:20090808-142501869
Official Citation:Brian W. Rogers, Thomas R. Palfrey, Colin F. Camerer, Heterogeneous quantal response equilibrium and cognitive hierarchies, Journal of Economic Theory, Volume 144, Issue 4, July 2009, Pages 1440-1467, ISSN 0022-0531, DOI: 10.1016/j.jet.2008.11.010. (http://www.sciencedirect.com/science/article/B6WJ3-4V76297-4/2/3645f2ad31f18519b1e59b7ca69e95eb)
Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:14889
Collection:CaltechAUTHORS
Deposited By: George Porter
Deposited On:04 Sep 2009 16:37
Last Modified:08 Nov 2021 23:15

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